High oil prices are fast replacing Europe as the biggest danger to growth in Asia, threatening to smother consumer demand while taking a knife to exports and reigniting inflation.
Brent crude topping $128 a barrel is also a headache for central banks as it makes it harder to use easy monetary policy to cushion growth.
And any threat to Asia is a danger to all, as the world is counting on the region to keep growing to offset recession in Europe and a fitful recovery in the United States.
Just as the threat of a financial crisis has receded, the steep rise in oil prices in the first two months of 2012 has resurfaced as the greatest perceived threat to the outlook, warned Nomura's chief economic advisor, David Resler, in a note to clients.
Oil matters to Asia. The region is now the largest consumer of the commodity having surpassed North America in 2007 to account for more than 31 percent of world demand. Asia is home to four of the world's 10 largest oil-consuming countries in China, Japan, India and South Korea.
The region imports two-thirds of all its oil, which adds up to a very large bill indeed. Analysts at Nomura estimate that even after excluding Japan, Asia spent a net $447 billion on imports of oil and petroleum last year, up from $329 billion in 2010 and $234 billion the year before.
Spending on oil also takes a larger share of gross domestic product (GDP) in Asian countries compared to the West.
Indeed, Asia's hunger for oil is one reason prices eased only modestly last year even as global growth slowed and the European debt crisis raged.
Most blame geopolitics for the latest spike, and we don't quibble with that, said Frederic Neumann, an economist at HSBC in a note. But, fundamentally, Asia's huge appetite for crude is providing the backdrop.
He noted that for growth the level of oil prices mattered much more than the rate of change, since the cost of crude acts like a tax on consumers. Thus when Brent crude hit a 3- year high of $128.40 last week, it rang economic alarm bells.
For Asia, the current risk from rising oil prices isn't inflation, at least not yet. It's growth, said Neumann.
Exports to the West, looking already shaky, might take another knock, he explained. Even locally, as prices continue to climb, a number of economies, such as India, Korea and Thailand, could feel the pinch.
When gauging the likely impact of oil shocks, much depends on what is driving the move. If prices are rising because of strong global demand the impact would be a lot less than if it were caused by a shock to supply.
Given that many agencies have recently been revising down expectations for global growth, the current episode would not seem to be demand-driven.
Instead, most analysts blame tensions across the Middle East and lately the threat of tougher sanctions against Iran, a major exporter of the commodity.
Back in January, the International Monetary Fund warned that a total shutdown of Iranian exports could trigger a price spike of as much as 30 percent.
That would mean oil soaring to around $160 per barrel, higher than the 2008 peak blamed for weakening the global economy just before Lehman Brothers' bankruptcy sent it into a tailspin.
It is also particularly tricky for Asia in that China, India, Japan and South Korea are the four largest importers of Iranian oil.
SOME MORE VULNERABLE THAN OTHERS
While the impact of a further substantial rise in oil would clearly be negative for Asia as a whole, it would vary greatly country to country. Malaysia, for instance, is a net exporter of oil, so could actually be a beneficiary.
In contrast, analysts at Barclays estimate that a 10 percent increase in oil prices would add around $1 billion to South Korea's monthly imports bill.
In general, analysts consider the economies of India, South Korea, Indonesia, Thailand and the Philippines as the most vulnerable to the drag from higher oil prices. China and Singapore would be less affected, while oil exporters Malaysia and Vietnam should benefit.
For Japan, higher prices would seem to be all bad. The country is the world's third biggest oil importer and its dependence on energy imports has only grown since almost all its power-generating nuclear reactors have been shut after the Fukushima nuclear disaster a year ago.
Yet expectations that Japanese importers would have to buy more dollars to pay for oil has helped push the yen down across the board in the last few weeks. The U.S. dollar touched a nine-month peak of 81.86 yen Monday having risen over 7 percent since the start of February.
A declining yen is a boon for Japan's hard-pressed exporters and has been welcomed by policy makers there.
Also with the economy stuck in a damaging spiral of deflation, the potential for a burst of oil-driven inflation would not necessarily be a negative.
When it comes to inflation, the speed of the rise in oil prices matters more than the level and, so far anyway, the move has been much less threatening than in 2007 and 2008.
Back then, Brent crude climbed from a low of $50.25 at the start of 2007 to reach a peak of $147.50 in July 2008, a rise of no less than 193 percent.
So far this year, Brent has risen just 15 percent, albeit in a short period of time. If prices level out here, the inflationary pulse of the move would be relatively modest and should not trouble monetary policy too much.
Were prices really to spike toward $150 a barrel then inflation could become much more of a restraint to monetary easing in China, India, South Korea and Taiwan.
Malaysia, Thailand, Indonesia and the Philippines might actually have to consider raising interest rates.
(Reporting by Wayne Cole; Editing by Emily Kaiser)